Russia starts crypto exchanges for the circumvention of US sanctions

Russia starts crypto exchanges for the circumvention of US sanctions

Russia has announced plans to start two state -headed cryptocurrency exchanges in order to integrate digital payment mechanisms for trade. This decision comes in response to the US sanctions that force Russia to find alternative payment methods in order to keep its economy going. These two stock exchanges are to be operated in Moscow and St. Petersburg. In addition, Russia, which is a member of the BRICS group, plans to introduce a new stable coin to be linked to the Chinese Yuan.

A stablecoin is a kind of cryptocurrency, the value of which is bound to a stable reserve currency, in this case the Chinese Yuan. The aim is to minimize volatility and enable stable transactions without having to be afraid of fluctuating prices.

stable payment system thanks to the new cryptocurrency

by coupling the Chinese Yuan with the new cryptocurrency staff in a ratio of 1: 1, the value of the coin remains constant. This stability makes them particularly attractive for international trade processing. In addition, it enables Russia to effectively bypass the US sanctions and at the same time reduce dependence on the US dollar.

This could have far-reaching implications for the global economy, since the Brics block (consisting of Brazil, Russia, India, China and South Africa) increasingly carries out its payment processing in local currencies instead of in US dollars. These developments could significantly reduce the importance of the US dollar in international trade.

The Russian rubles and the Chinese Yuan will be the main beneficiaries if the trade handling are switched to this new mechanism. It is expected that the local currency will take over a significant share in future payments.

displacement of the US dollar by BRICS alliance

The de-dollarization agenda of the Brics countries is picking up, and the introduction of the Chinese Yuan-linked stable coin is another important step in this direction. Many developing countries have already started to process part of their trade in Chinese Yuan instead of using the US dollar.

China strives to make the Yuan a global leading currency, and Russia supports this project by providing the necessary infrastructures and opening international trade routes. The long-term effects on the US dollar could be serious, since the Brics Alliance puts Chinese Yuan in the foreground of all cross-border transactions.

The US sanctions have forced Russia to think innovatively and explore new payment routes. As a result, participation in BRICS not only offers a platform for cooperation, but also the opportunity to overcome economic obstacles.

outlook for the international trade landscape

The current dynamics of the de-dollarization and the emphasis on local currencies by large business powers such as China and Russia signal a shift in the global trade landscape. The BRICS countries take targeted steps to solve international trade from the dominance of the US dollar. These changes could continue to increase in the coming years and change the global economic system permanently.

comparable historical events

In history, there were similar efforts to break away from a dominant global currency. An important example of this is the 1971 Nixon shock when the United States dissolved the bond of the US dollar in gold. This decision led to the end of the Bretton Woods system and to introduce flexible exchange rates. Another historical example is the introduction of the Euro 1999, which replaced the US dollar as a trade currency in many member countries of the European Union.

Compared to these events, the current step of Russia shows similarities and differences. Similar to the Nixon shock, Russia strives to break the bond to a dominant currency, in this case the US dollar. Unlike the euro, which was accompanied by the introduction of a new, independent currency, Russia plans to create a stable digital asset that is linked to another national currency, the Chinese Yuan.

background information: economic and political relationships

Russia's initiative, cryptocurrency exchanges and a Yuan-coupled stable coin is strongly motivated by the economic and political tensions with western countries. The sanctions of the United States and the EU, imposed in the course of the Ukraine conflict, have caused Russia to look for alternatives to financing and trade. Due to these sanctions, the access of Russia to global financial markets and western technology is severely restricted.

The relationship between Russia and China has also intensified in recent years. Both countries have reinforced economic and political alliances to reduce their dependence on the West. In this context, China actively advanced the internationalization of Yuan by concluding bilateral trade agreements with several countries in which the Yuan is used instead of the US dollar.

growing importance of the BRICS countries

The Brics countries (Brazil, Russia, India, China and South Africa) take an increasingly important economic position globally. Together they make up about 42% of the world's population and around 23% of global GDP. Your collective strength and strategic partnerships offer the opportunity to act against the dominant western business powers. According to the International Monetary Fund (IMF), the BRICS countries also increased their international reserves to more than $ 4 trillion. [Source: Homepage of the IWF]

numbers and data on the economic situation

The economic situation in Russia is severely impaired by the sanctions. According to data from the World Bank, the Russian GDP 2022 has shrunk by 2.2%. Inflation reached an average of 12.5%in 2022, which has been the highest level for many years. On the other hand, CHINA has recorded 8.1% economic growth in 2022, the highest for a decade. [Source: Homepage of the World Bank]

Another indicator of the growing importance of the Yuan is his share of the global foreign exchange reserves, which, according to the bank for international payment compensation (BIZ), is now around 2.5%. This represents a significant increase compared to previous years. [Source: Homepage of BIZ]

Future developments in the international financial system

The introduction of the Yuan-bound stable coin and the cryptocurrency exchanges could have a significant impact on the international financial system. On the one hand, this offers Russia and China the opportunity to design their economic activities more independently of Western financial systems. On the other hand, other countries that are faced with similar restrictions could take this path as an example and take similar measures.

The role of the US dollar as a dominant global currency could be weakened in the long term, which would lead to comprehensive changes in international trade and financial markets.

Further information about the economic indicators and analyzes can be found on the homepages of the organizations mentioned: International Monetary Fund (IWF) , WorldBank , Bank for international payment compensation (biz) .